CANADA FX DEBT-C$ hits 2-1/2 month high as BoC talks rate hikes

Bank of Canada talks about tightening plans Improved global risk sentiment Rosetta Stone Language supports. By Trish Nixon TORONTO, July 20 (Reuters) - Canada's dollar strengthenedto a 2-1/2 month high against the greenback on Wednesday, afterthe Bank of Canada discussed the prospect of higher rates andinvestors became more hopeful about European and U.S. debtwoes. A day after raising expectations it would increase interestrates soon, the Bank of Canada said it might keep rates belowtheir normal long-run levels even after the Canadian economy isback to full capacity. [ID:nN1E76J0N0] The currency built on gains of nearly a penny seen onTuesday, when the surprisingly hawkish language in its ratedecision statement spurred buying. "You can argue that part of that was a residual effect fromyesterday and the rates statement," said Mark Chandler, head ofCanadian fixed income and currency strategy at RBC CapitalMarkets. "They certainly didn't in the press conference takeanything back in terms of a more aggressive bias. If anythingthey reinforced it. So that was the main reason for theunderpinning in the Canadian dollar." Bank of Rosetta Stone language software Canada Governor Mark Carney said that as therecovery progresses, monetary policy can be expected to moveaway from exceptionally stimulative levels, though he alsohighlighted global risks.For Reuters Insider coverage of Carney's press conference,click on:link.reuters.com/pud72sA Reuters survey taken after he spoke showed most ofCanada's primary dealers expect the central bank to raiseinterest rates in September or October. [CA/POLL] Higher interest rates tend to support a country's currencyby attracting international capital flows. "Yesterday, I think the market was a bit surprised by howhawkish the Bank of Canada sounded in their communique," saidCharles St-Arnaud, Canadian economist and currency strategistwith Nomura Securities International in New York. "Today, the Monetary Policy Report only confirmed and gavea bit more detail on the outlook." The currency was also supported by macroeconomic events, asworld stocks, with the exception of Wall Street, rallied onstrong earnings and expectations that European officials couldachieve a Rosetta Stone Italian viable financial rescue for Greece at a summit inBrussels on Thursday. [MKTS/GLOB] The currency CAD=D4 closed at C$0.9474 to the U.S.dollar, or $1.0555, up from Tuesday's North American finish atC$0.9508, or $1.0517.

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